We sold gold sovereigns and silver coins that the family used at puja. Were they personal effects, outside capital gains?
No. The exclusion for personal effects requires an intimate connection between the article and the person of the assessee - articles meant for personal use. Sovereigns and silver coins customarily used for puja and other ritual purposes are not effects meant for personal use, so they were capital assets and the gain on them could not be excluded.
Decided by the Supreme Court (Supreme Court of India (A.C. Gupta and Jaswant Singh, JJ.; judgment by Jaswant Singh, J.), Civil Appeal No. 779 of 1971) on 1976-02-17, reported as (1976) 103 ITR 61 / 1976 CTR 188 (SC). It bears on section 2(14), section 2(14)(ii), section 45, section 2(4A) of the Indian Income-tax Act, 1922, section 12B of the Indian Income-tax Act, 1922 of the Income Tax Act 1961, in Capital Gains matters.
This is the decision the department reaches for whenever an assessee describes bullion, coins, silver utensils or heirlooms as personal effects. The test it lays down - intimate connection with the person of the assessee - is what has to be satisfied, and it is a much narrower thing than 'kept at home' or 'used by the family'. It matters even now for silver articles and coins, which are not caught by the express carve-out for jewellery and so still have to be argued on the personal effects test itself.
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Maharaja Shri Udebhan Singhji of Dholpur died issueless on 22 October 1954, and the day after his death the Government of Rajasthan took over and sealed all his movable valuables because succession to the gaddi was in dispute. On 13 December 1956 the appellant, then a minor, was recognised by the Government of India as the former Maharaja's successor, and on 24 March 1957 the assets were released and handed to the Rajmata as his adoptive mother and guardian. They included 4,825 gold sovereigns, 7,90,440 old silver rupee coins and silver bars weighing 2,54,174 tolas. During the financial year 1957-58 these were sold, at the suggestion of the Government of India, for a net consideration of Rs. 20,78,257. Taking the market value as on 1 January 1954, the Income-tax Officer, Bharatpur, computed a capital gain of Rs. 3,44,303. The assessee's case was that the sale was not voluntary and so not chargeable under s.12B of the Indian Income-tax Act, 1922, and that the articles were not capital assets because they fell within the personal effects exception in s.2(4A)(ii), having been used for Maha Lakshmi puja and other religious festivals and rituals in the family. The Appellate Assistant Commissioner and the Tribunal rejected the claim, the Tribunal holding that the voluntariness of the sale was irrelevant under s.12B on the authority of James Anderson v. CIT [1960] 39 ITR 123 (SC). The Rajasthan High Court, on a reference under s.66(1), answered against the assessee on 2 December 1969.
The appeal was dismissed with costs. Only those effects can be said to be personal which pertain to the assessee's person: an intimate connection between the effects and the person of the assessee must be shown. Silver bars or bullion cannot by any stretch be effects meant for personal use, and neither can sovereigns and silver coins brought out of iron safes and boxes on two occasions in the year - the Ashtami day of Sharadh Paksh for Maha Lakshmi puja and Diwali. They may have been used for puja of the deities as a matter of pride or ornamentation, but that is not personal use. The articles were therefore capital assets and could not be excluded in computing the gains.
The Court read the words 'held for personal use' in s.2(4A)(ii) as the controlling ones. The illustrations in the definition - wearing apparel, jewellery and furniture - showed that Parliament meant to include only articles intimately and commonly used by the assessee, and dictionary usage pointed the same way: the Random House, Black's and the Cyclopaedic Law Dictionary all define personal effects by reference to articles worn or carried about the person or having an intimate relation to the person of the possessor. It drew support from s.5(1)(viii) of the Wealth-tax Act, 1957, which it treated as in pari materia, and from the Bombay High Court's decision in G.S. Poddar v. CWT, where gold caskets and gold table articles kept in a drawing-room show case were held not to be household utensils or furniture: use as a decoration calculated to give a pride of possession is not the personal use contemplated, and 'intended for personal use' means normally, commonly or ordinarily so intended, not merely capable of being so intended. The Court also made a point on the facts: as the income-tax authorities had observed, if the sanctity of puja had really been essential to the assessee the articles would not have been handed by his guardian to the banks for sale. It noted that no exemption had been claimed in respect of these articles under the Wealth-tax Act. CWT v. Arundhati Balkrishna [1970] 77 ITR 505 (SC), pressed for the assessee, was held to be of no assistance because the point now argued had never been canvassed or considered there.
A close scrutiny of the context in which the expression occurs shows that only those effects can legitimately be said to be personal which pertain to the assessee's person. In other words, an intimate connection between the effects and the person of the assessee must be shown to exist to render them "personal effects".
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Handle my notice → Ask a CA on WhatsAppNo. The exclusion for personal effects requires an intimate connection between the article and the person of the assessee - articles meant for personal use. Sovereigns and silver coins customarily used for puja and other ritual purposes are not effects meant for personal use, so they were capital assets and the gain on them could not be excluded. This was decided by the Supreme Court (Supreme Court of India (A.C. Gupta and Jaswant Singh, JJ.; judgment by Jaswant Singh, J.), Civil Appeal No. 779 of 1971) and bears on section 2(14), section 2(14)(ii), section 45, section 2(4A) of the Indian Income-tax Act, 1922, section 12B of the Indian Income-tax Act, 1922 of the Income Tax Act 1961. It is reported as (1976) 103 ITR 61 / 1976 CTR 188 (SC). This is the decision the department reaches for whenever an assessee describes bullion, coins, silver utensils or heirlooms as personal effects. The test it lays down - intimate connection with the person of the assessee - is what has to be satisfied, and it is a much narrower thing than 'kept at home' or 'used by the family'. It matters even now for silver articles and coins, which are not caught by the express carve-out for jewellery and so still have to be argued on the personal effects test itself. If it applies to you, the first step is this: Ask what the article was actually used for and by whom, and be able to show personal use of the article on the person, not merely household or ritual use.
Maharaja Shri Udebhan Singhji of Dholpur died issueless on 22 October 1954, and the day after his death the Government of Rajasthan took over and sealed all his movable valuables because succession to the gaddi was in dispute. On 13 December 1956 the appellant, then a minor, was recognised by the Government of India as the former Maharaja's successor, and on 24 March 1957 the assets were released and handed to the Rajmata as his adoptive mother and guardian. They included 4,825 gold sovereigns, 7,90,440 old silver rupee coins and silver bars weighing 2,54,174 tolas. During the financial year 1957-58 these were sold, at the suggestion of the Government of India, for a net consideration of Rs. 20,78,257. Taking the market value as on 1 January 1954, the Income-tax Officer, Bharatpur, computed a capital gain of Rs. 3,44,303. The assessee's case was that the sale was not voluntary and so not chargeable under s.12B of the Indian Income-tax Act, 1922, and that the articles were not capital assets because they fell within the personal effects exception in s.2(4A)(ii), having been used for Maha Lakshmi puja and other religious festivals and rituals in the family. The Appellate Assistant Commissioner and the Tribunal rejected the claim, the Tribunal holding that the voluntariness of the sale was irrelevant under s.12B on the authority of James Anderson v. CIT [1960] 39 ITR 123 (SC). The Rajasthan High Court, on a reference under s.66(1), answered against the assessee on 2 December 1969. The matter was decided on 1976-02-17 by the Supreme Court (Supreme Court of India (A.C. Gupta and Jaswant Singh, JJ.; judgment by Jaswant Singh, J.), Civil Appeal No. 779 of 1971). On those facts the Supreme Court held as follows. The appeal was dismissed with costs. Only those effects can be said to be personal which pertain to the assessee's person: an intimate connection between the effects and the person of the assessee must be shown. Silver bars or bullion cannot by any stretch be effects meant for personal use, and neither can sovereigns and silver coins brought out of iron safes and boxes on two occasions in the year - the Ashtami day of Sharadh Paksh for Maha Lakshmi puja and Diwali. They may have been used for puja of the deities as a matter of pride or ornamentation, but that is not personal use. The articles were therefore capital assets and could not be excluded in computing the gains.
The Court read the words 'held for personal use' in s.2(4A)(ii) as the controlling ones. The illustrations in the definition - wearing apparel, jewellery and furniture - showed that Parliament meant to include only articles intimately and commonly used by the assessee, and dictionary usage pointed the same way: the Random House, Black's and the Cyclopaedic Law Dictionary all define personal effects by reference to articles worn or carried about the person or having an intimate relation to the person of the possessor. It drew support from s.5(1)(viii) of the Wealth-tax Act, 1957, which it treated as in pari materia, and from the Bombay High Court's decision in G.S. Poddar v. CWT, where gold caskets and gold table articles kept in a drawing-room show case were held not to be household utensils or furniture: use as a decoration calculated to give a pride of possession is not the personal use contemplated, and 'intended for personal use' means normally, commonly or ordinarily so intended, not merely capable of being so intended. The Court also made a point on the facts: as the income-tax authorities had observed, if the sanctity of puja had really been essential to the assessee the articles would not have been handed by his guardian to the banks for sale. It noted that no exemption had been claimed in respect of these articles under the Wealth-tax Act. CWT v. Arundhati Balkrishna [1970] 77 ITR 505 (SC), pressed for the assessee, was held to be of no assistance because the point now argued had never been canvassed or considered there. In the words reproduced by the source cited on this page: "A close scrutiny of the context in which the expression occurs shows that only those effects can legitimately be said to be personal which pertain to the assessee's person. In other words, an intimate connection between the effects and the person of the assessee must be shown to exist to render them "personal effects"." The decision followed or applied G.S. Poddar v. CWT [1965] 57 ITR 207 (Bom.) - approved; H.H. Maharaja Rana Hemant Singhji v. CIT [1970] 77 ITR 1007 (Raj.) - the judgment under appeal, affirmed.
It was decided by the Supreme Court on 1976-02-17 and is reported as (1976) 103 ITR 61 / 1976 CTR 188 (SC). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 2(14), section 2(14)(ii), section 45, section 2(4A) of the Indian Income-tax Act, 1922, section 12B of the Indian Income-tax Act, 1922, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeal was dismissed with costs. Only those effects can be said to be personal which pertain to the assessee's person: an intimate connection between the effects and the person of the assessee must be shown. Silver bars or bullion cannot by any stretch be effects meant for personal use, and neither can sovereigns and silver coins brought out of iron safes and boxes on two occasions in the year - the Ashtami day of Sharadh Paksh for Maha Lakshmi puja and Diwali. They may have been used for puja of the deities as a matter of pride or ornamentation, but that is not personal use. The articles were therefore capital assets and could not be excluded in computing the gains. It arises in Capital Gains matters, on section 2(14), section 2(14)(ii), section 45, section 2(4A) of the Indian Income-tax Act, 1922, section 12B of the Indian Income-tax Act, 1922 of the Income Tax Act 1961, and was decided by Supreme Court of India (A.C. Gupta and Jaswant Singh, JJ.; judgment by Jaswant Singh, J.), Civil Appeal No. 779 of 1971. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not describe bullion, coins or bars as personal effects; on this authority they are capital assets and the gain is chargeable. For jewellery, do not argue the point at all for years from assessment year 1973-74 onwards - jewellery is expressly excluded from personal effects by s.2(14)(ii) and the argument is closed by statute. Where silver utensils are in issue, put the frequency and manner of personal use on record, because the article's nature decides how often it would be used.
Still good law. Good law on its own facts, but read it with the qualification a later Bench put on it. In CIT v. H.H. Maharani Usha Devi [1998] 98 Taxman 309 / 231 ITR 793 / 147 CTR 1 (SC), decided 14 May 1998 (Sujata V. Manohar and S. Rajendra Babu, JJ., Civil Appeal No. 10004 of 1983), the department relied on this decision to argue that heirloom jewellery used only on ceremonial occasions was not held for personal use. The Court agreed that silver bars, sovereigns and rupee coins used on special occasions for worship 'could not be considered as personal effects', so the result here stands - but it went on to say that the phrase 'intimately and commonly' used in this judgment 'should not be taken literally', that what was meant was property individually or personally used, and that this judgment does not deal with jewellery meant to be worn on the person. It approved CIT v. Smt. Sitadevi N. Poddar [1984] 148 ITR 506 / 17 Taxman 345 (Bom.), which had distinguished this decision and held that personal effects are not confined to articles worn on the person, the inclusion of furniture in the definition negativing that, and it approved Jayantilal A. Shah v. K.N. Anantharam Aiyar, CIT [1985] 156 ITR 448 / 23 Taxman 14 (Bom.), which had followed Sitadevi N. Poddar. It disapproved CIT v. Trustees of H.E.H. the Nizam's Wedding Gifts Trusts [1985] 154 ITR 573 (AP). So a digest that lists Jayantilal A. Shah as a case following this decision is misleading: the line of authority it belongs to distinguishes it. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read in full in the law report at [1976] 103 ITR 61 (SC). The decision is given under the Indian Income-tax Act, 1922, on ss.2(4A)(ii) and 12B; s.2(14) and s.45 of the 1961 Act are listed in this entry only because the personal effects exclusion is in the same terms and the reporter indexes it that way - neither section appears in the judgment. The judgment records the sale as having taken place during the financial year 1957-58 and does not state the assessment year, so the year given in this entry should be read as the year of sale rather than as a verified assessment year. The report carries no numbered paragraphs. Two further points a reader should hold on to: the Court's illustration of what is not personal use is an article kept for the pride of possession or for ornamentation, and its own factual answer to the puja argument was that the articles were handed to banks for sale. The narrower half of the test - that personal effects must pertain to the person of the assessee - has since been read down by the Supreme Court in H.H. Maharani Usha Devi, recorded under validity. The decision does not tell you where silver utensils in ordinary household use fall - that was decided the other way by the Bombay High Court in CIT v. Smt. Sitadevi N. Poddar, approved by the Supreme Court in H.H. Maharani Usha Devi - and it says nothing about the burden of proof or about how many articles a family may claim as personal effects. It does not decide the assessee's other argument, that a sale made at the Government's suggestion is not a voluntary sale: the Tribunal disposed of that on James Anderson and the point was not pressed in the Supreme Court. Jewellery worn on the person is outside it altogether. The provision it construes has since been amended: jewellery was taken out of the personal effects exclusion in s.2(14)(ii) of the 1961 Act, so the exclusion no longer reads as it did. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed with costs. Only those effects can be said to be personal which pertain to the assessee's person: an intimate connection between the effects and the person of the assessee must be shown. Silver bars or bullion cannot by any stretch be effects meant for personal use, and neither can sovereigns and silver coins brought out of iron safes and boxes on two occasions in the year - the Ashtami day of Sharadh Paksh for Maha Lakshmi puja and Diwali. They may have been used for puja of the deities as a matter of pride or ornamentation, but that is not personal use. The articles were therefore capital assets and could not be excluded in computing the gains.
TaxSphere, “H H Maharaja Rana Hemant Singhji v CIT”, https://taxnotice.vittsphere.com/caselaw/case/hh-maharaja-rana-hemant-singhji-v-cit-personal-effects/ (validity last checked 2026-08-22)
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